Suppose Jack and Kate are at the town fair and are choosing which game to play. The first game has a bag with four marbles in it-1 red marble and 3 blue ones. The player draws one marble from the bag; if it is red, they win $20 and if it is blue, they win $1. The second game has a bag with 10 marbles in it-1 red, 4 blue, and 5 green. The player draws one marble from the bag; if it is red, they win $20; if it is blue, they win $5; and if it is green, they win $1. Both games cost $5 to play. Assume Jack will play the games that have a higher expected payoff than the cost of playing the game. Comparing the expected value of the payoff of each game to the price of $5 to play, we can conclude that Jack should:
A. play both.
B. play the first but not the second.
C. play the second but not the first.
D. play neither.
Answer: B
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A. railroads enjoy significant economies of scale. B. conditions in the railroad industry are conducive to destructive competition. C. regulators would like to ensure universal service to all potential railroad customers. D. railroads are vulnerable to predatory pricing.
Investment banks are vulnerable because
A) the maturity of their liabilities is less than the maturity of their assets. B) the maturity of their assets is less than the maturity of their liabilities. C) they tend to be underleveraged. D) they tend to primarily hold short-term assets.
A point along the production possibility frontier is:
A. inefficient. B. impossible. C. efficient. D. utility-maximizing.
Which of the following would likely occur if a larger number of highly skilled workers were allowed to immigrate to the U.S.?
a. The average wage for highly skilled workers would decline. b. The average wage for highly skilled workers would increase. c. The supply curve for highly skilled workers would shift to the left. d. The demand curve for highly skilled workers would flatten out.